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A Guide On Whole Life Insurance Policy

A whole life insurance policy covers as long as you live. As it offers risk coverage for the entire life, it is called whole life policy. It offers dual benefit of life coverage and bonus. The premium is paid for the first 10-15 years and the insurance cover is extended till the entire life of the insured. For instance, if you are 30 years old and you opt for the whole life plan whose sum assured is Rs 30 lakh, then you would stop paying premium when you are 45 years of age but the coverage would last for your entire life. The premium is paid only for a limited duration and therefore, it is high.

Features of Whole Life Policy

The policy provides insurance coverage to the policyholder for the entire life. Upon death of a policyholder, insurance payout is made to the nominee. It comes loaded with following features:

  • Protection for life
  • Guaranteed Premium
  • Death Benefits
  • Annual Bonus (time period might vary from plan to plan)
  • Loan can be availed against whole life policies
  • Tax benefits u/s 80C and 10 (10D) of the Income Tax Act, 1961

Types of whole life policy

Whole life policies can be further divided under following heads-

  • Pure Whole Life Insurance = Premiums are paid throughout life of the insured till his/her death. Risk coverage is given for the entire duration and sum assured is paid after the death of the policyholder.
  • Limited Payment Whole Life Insurance= Premiums are payable for a limited and shorter period of time as chosen by the insured.  However, risk coverage is given for the entire life of the insured.

The maturity proceeds differ from one plan to another. Some plans offer either recurring bonus or terminal bonus or both. Also the plans come with different premium payment options- single, limited and regular.

How it works?

Every year, insured pays a premium. Out of this, a portion will be used for providing protection and the remaining stays invested in the company. If a profit is earned, policyholder is entitled to get the bonus on the invested amount. The investment grows in value and is returned to the policyholder if he chooses to withdraw or lives till the maturity of the plan.

To sum up, whole life plans give life cover for the entire life and help build a corpus. It is good to include this option in your investment portfolio.